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EC Regional Water and Energy Workshop

Bridgetown, 18-22 May 2015

EU Technical Assistance Facility for the
Sustainable Energy for All Initiative

Rural Electrification and the Different Business Models

Presented by: Emmanuel Bergasse, Key Expert, EU TAF for SE4All

A SOFRECO led Consortium

1. General introduction to Electricity Access/Rural Electrification

2. Off-grid Stand-alone PV Systems

3. Mini-grid for Rural Electrification

Main Objectives

Participants to be
Aware of the fundamentals of electricity access and rural
Familiar with rural electrification schemes (off-grid) and
existing business models
1. Electricity Access
& Rural Electrification
Which indicators for electricity access?

Electrification rate: the population with effective

access to electricity, compared to the total population
(or the total number of households)
Electricity access rate: proportion of population living
in electrified localities relative to the total population
Electricity coverage ratio: Number of electrified
localities relative to the total number of localities
Electricity Service rate or penetration rate: Population
actually having access to electricity compared to the
total population of electrified localities.
How to get access to electricity?
Access is not a binary state but a process that starts with the basic
energy services adapted to the range of affordability

Energized Tier 4 & 5

Work 80 W 4 lights, phone,
radio, TV, sewing Tier 3

Media 40 W
4 lights, phone,
radio, TV Tier 2

Home 10 W
4 lights, phone,

Light 3W
2 lights, phone Tier 1

Tier 0 Disconnected
Energy Efficiency unlocks the energy ladder
Replacing incandescent light bulbs with LED light bulbs delivers the
same energy service for 50-85% less energy
The most energy efficient fans move four to eight times as much
air per watt as less efficient fans
Similar gains possible for refrigeration, possibly shared amongst
several households
Energy efficient appliances (A+) cost more up front, but cost far
less than generating excess power in the long run:
Leverage of Energy Efficiency Standards (MEPS) and Labeling (S&L)
What is Rural Electrification?


Off Grid

On Grid
In filling

City Peri Rural Community Isolated Community Dispersed

centre urban town w. public public w/o public private
facilities facilities facilities loads
Urban Rural
Which options for Rural Electrification?

Grid Off-Grid
33 kV Perimeter Perimeter

Perimeter 100 kV Biomass
> X pop
Justified by high

Least cost decision making process
for Rural Electrification
from grid

Size of

Decision: grid extension off grid Decision: mini grid

or off grid? or individual system?

Concentrated: Dispersed: mainly

Some productive loads Minigrid Individual household lighting

Community Resource availability

Income level

Diesel Equipment availability

Energy Solar home
Tech. - RET* system - SHS

Diesel - RET Wind home

hybrid system - WHS

Pico hydro

* RET = windpower, solar PV, hydro, biomass gasifier, biomass direct combustion
Electricity access solutions up
the energy ladder

Continuous Spectrum of improving Electricity supply Attributes

Attributes Tier 0 Tier 1 Tier 1 Tier 1.5 Tier 2 Tier 2.5 Tier 3 Tier 3 Tier 4 Tier 5
Tier 3 and
Task lighting Task lighting 4 lights, General General Tier 2 and Tier 2 and any Tier 3 and
and phone and phone phone lighting and lighting and any low any low medium any high
Kerosene charging (or charging (or charging TV or fan (if TV and fan power power power power
Service Description lighting radio) radio) and radio needed) (if needed) applicances applicances applicance applicances
Peak available
- 1 5 10 20 50 200 500 2000 2000
capacity (W)
- 4 4 4 4 4 8 8 16 22
Evening supply
- 2 2 2 2 2 2 2 4 4
Average annual consumption per household
Load factor 17% 17% 17% 17% 17% 18% 20% 20% 25%
annual consumption
1,5 7,3 14,6 29,2 73 315 876 3504 4380
Price of electricity
5,0 4,8 4,0 4,0 3,0 1,0 0,50 0,30 0,25
annual cost
7,3 35 58 117 219 315 438 1051 1095
Average costs (US$/household)
Least cost 70 110 166 288 500 1800 3200 1600 1600

Likely electricity None Solar Stand-alone home

supply technology lanterns Mini grid on grid
2. Off-grid Stand-alone
PV systems
Rationale for Stand-alone electrification
Off-grid solutions are proposed by central planners to priority loads and
neighbouring dense population clusters that are distant from main grid
The electrification of populations in isolated areas not close to a priority
load may be delayed by many years and even decades
In isolated services areas (e.g. that are distant from the main grid e.g.
over 10 km) where loads are fairly distant of each other or are in limited
number (less than 20 customers), the universal access policy may be
implemented by the market with private operators

Solar PV products are cheaper, brighter, more efficient, healthier than

kerosene lamps, candles or dry cell flashlights and offer additional
important functionalities such as mobile phone charging outlets.
Also simpler (plug & play)
Solar Portable Lights (SPL)
Single light source with/without mobile phone charging outlet
Entry level products with solar (PV) panels of 0.2-2 W
Price range: $20-$60

Little Sun
d.light S20
Pico PV Systems (PPS)

Multi-lights source applications with mobile phone

charging outlet made of a kit of components
Power range: 2-10 W
Price range: $150-$200
Solar Home Systems (SHS)
Multi lights source applications with mobile phone charging
Sources can power devices such as radio and TV
Power range: 10 W-250 W
Price range: $150-$400
Residential Home Systems (RHS)
12V systems replace diesel generators or car batteries, 12V
systems can power multiple lighting points and devices
such as TV and fridges
Power range: 250 W-1,000 W
Price range: $400-$1,500

Can be combined with Solar Water Heaters (SWH)

3 main trends drive the Solar PV market
1. Decreasing Solar PV products cost
By 6% per annum over 2012-2020
Performance and production cost will continue to improve
Key costs improvement from PV, batteries, LED and chips
2. Increasing kerosene cost
By 4% per annum over 2012-2020
Kerosene price grows in line with the oil price
Price premium for rural customer must be considered
3. Increasing mobile penetration
By 8% per year in Caribbean region (2012)
Mobile communication is key facilitator for rural development
Mobile charging functionality of accelerates development
Solar PV products market is becoming more
established with proven business models

Up-front payment to installments: Pay-to-own

System activation through a code on scratch card
Unit remotely turned off upon late payment
Once fully paid, unit is permanently turned on and owned by customer
Products sales to services supply: Pay-as-you-go
Customer takes home Solar PV product after initial deposit
Embedded SIM card enable further payment through mobile
Modularized systems that can be extended
Coverage of value chain by key players
Business models for off-grid
1) Traditional public business model
Ministry of Bilateral
Energy agreement

Co-funding Planning Rural

Electrification Master Plan Funding

Rural Electrification
Agency Funding
Donation Installation Supplyer

Consumer 2 year
2) Private market driven business models
One hand business model Two hand business model

Fee for service or pay as Lease /hire purchase

you go business model business model
The top market barrier is access to finance
1. Access to finance for solar firms
Access to working capital
Long-term growth financing
2. Policy issues
Regulatory uncertainties
Tax and duty on quality off grid lighting products
Subsidy on kerosene or LPG
Phase out of fuel based lighting
3. Poor product quality
Low quality players
Technical specifications and standards & labelling
Installer certification
Key Questions for
Stand-alone electrification

1. Is the cost (up-front or annual) per household acceptable?

2. How and who will operate & maintain the stand-alone systems?
3. What will happen when batteries reach their end of technical life?
3. Mini-grid for Rural
Main components of a mini-grid
Small scale generators (diesel, RE)
Medium voltage distribution line
MV/LV distribution lines and LV
distribution lines to supply load at
a limited distance of distribution
Service drop line that links the
distribution LV line and the meter
of the consumer
Service entrance system including
the distribution board with
protection and in-house wiring
that connect the appliances.
Rationale for mini-grid electrification
When a mini-grid is built in a village, all rural households-even
those who do not have the financial resources to afford
electricity in their own homes can enjoy its benefits: drinking or
irrigation water, street lighting, improved educational and
health services, agroprocessing
Residual cost of a mini-grid, after deduction of subsidies, is
shared between all connected customers
Its quality of electricity supply is constrained by the original
design and affordability criteria
A mini-grid implies a generation license and a distribution
license (managed to some extent at local level)
Reference costs of a mini-grid
Technology -based Size range Power plant LCOE Operating time
MG (kW) ($/kW) ($/kWh) (h/yr)

Diesel genset 5 300 500 1500 0.3 0.6 On demand

Hydro 10 1000 2000 5000 0.1 0.3 3000 8000
Biomass-gasifier 50 300 2000 3000 0.1 0.3 3000 6000
Wind hybrid 1 100 2000 6000 0.2 0.4 2000 2500
Solar hybrid 1 150 5000 10000 0.4 0.6 1000 2000

MV distribution 33kV 13,000 - 15,000 $/km (site specific)

LV distribution 380V 5,000 8,000 A rough estimate of the required
$/km length is 30 customers per km.
Connection costs Ideally $350 per customer (but Capex/customer varies $350-3500)
Hybridizing a diesel generator
Diesel Configuration (n x kW) 1 x 20 kW 1 x 60 kW 1 x 100 kW
Diesel installed capacity (kW) 20 60 100

Wind configuration (n x kW) 1 x 10 kW 2 x 20 kW 1 x 80 kW

Nb of modules 1 2 1
Wind installed capacity (kW) 10 40 80

PV configuration (n x kW) 1 x 10 kW 1 x 10 kW 1 x 25 kW
Nb of modules 1 1 1
PV installed capacity (kW) 10 10 25

Fixed Cost
Capital ( 2007$ thousand) 147 344 539
Capital (2007$/kW) 7358 5736 5395
Diesel ($/kW) 2300 1550 1381
Wind ($/kW) 5000 5000 3839
PV ($/kW) 5116 5116 3768
Capital (2007/kW) 5371 4187 3938

Solar availability factor 18% 18% 18%

Wind availability factor 20% 20% 20%
Diesel availability factor 90,00% 90,00% 90,00%
Outage Adjustment 1,1111 1,1111 1,1111

Adjusted Annual Fixed Cost hybrid scheme ($/kW,yr) 2898 1867 1516
Adjusted Annual Fixed Cost diesel only ($/kW,yr) 1 968 1 154 948

Variable Cost
Fuel Price scenario ($/litre) 1,9 1,9 1,9
SRMC diesel only (UScts/kWh) 61,5 56,8 54,7

Summary of generation costs for a

decentralized diesel wind solar power plant
Total Annual Fixed Cost ($/kW/yr) 2 608 1 680 1 364
SRMC (UScts/kWh) 49,8 47,5 43,5
LRMC (UScts/kWh) 82,9 68,8 60,8
Business models for Mini-grids
Business Models Borrower Owner Asset Remark

Utility based 1 Existing Utility Utility Known by most FIs

Franchise 1 Franchisee Franchisee Management performance
possibly backed by enforced by Franchiser
A-B-C Business 1 New Private A-B-C Anchor-load based
Model with Anchor Utility Company
Clustering Model 1 New Energy Energy Service Existing client based;
Service Company Company economies of scale
Local Entrepreneur 1 Existing Entrepreneur Well established social
Model entrepreneur network
Private ESCO 1 New Energy N civilians Weak creditor base -
Contractor Service Company unproven
Private 1 New IPP Concessionaire Contract-based. Ongoing
Concessionaire investment obligations
Generator IPP 1 New Generator IPP Contract-based
Private Distributor 1 New Distributor Distributor Weak creditor base
Community based 1 New Community N civilians Weak creditor base -
Questions for mini-grid electrification

1. Is the project developer reliable and creditworthy?

2. Does the Mini-Grid Business Model comply with legal framework?
3. Is the proposed Mini-Grid project technically & financially viable?
4. Is the tariff affordable to most customers? How do electricity bills
are recovered? By whom?
5. What happens if the mini-grid scheme is connected to main grid?
Examples of Mini-grid hybrid diesel/RE
projects in the LAC region
3 steps approach:

Source: Renewable energy in hybrid mini-grids and isolated grids: Economic benefits
and business cases Frankfurt School- UNEP Collaborating Centre for Climate and
Sustainable Energy Finance (December 2014).
Las Terrenas, Dominican Republic
Mini hybrid grid/LAC (3)
Bequia, St. Vincent & the Grenadine
Mini hybrid grid/LAC (4)

Puerto Leguizamo (Putumayo), Colombia

Mini hybrid grid/LAC (4)

Site Population Main Power Current Utility PV Option Diesel Cost

/Power Economic Demand Electricity Ownership (MW and % Consumptio Savings of
Customers Activity (Average/pe Supply (Generation & of Load) n Savings Hybrid
(in th.) -% of ak in MW) Situation Distribution) (%) Solution/IRR
low income) (generating (%)
Las Terrenas, 19/9-62% Services, 3.2/5.8 0.38/frequ Two private 6.7/31% 30% 12%/13%
Dominican mostly ent power utilities (G
tourism cuts & D)

Bequia, St. 4.3/2.3- Services, 0.9/1.5 0.34 One public 1.5/34% 32% 13%/13%
Vincent & NA mostly utility (G &
tourism D)

Puerto 31/3-NA Services 1.4/2.2 0.40/frequ Two public 2.7/31% 29% 13%/13%
Leguizamo ent power utilities (G
(Putumayo), cuts & D)

Frankfurt School- UNEP Collaborating Centre for Climate and Sustainable Energy Finance
1. Initiatives
Caribbean Renewable Energy Development Programme
REGSA - Promoting Renewable Electricity Generation in
South America (EuropeAid):
Alliance for Rural Electrification (ARE):
2. Trainings
Clean Energy Solutions Center: Clean Energy in Island Settings
(Training Webinar) -
2. Publications
ARE (2012-2014)
Rural Electrification with Renewable Energy
Green light for renewable energy in developing countries
Potential of Small Hydro for Rural Electrification-Focus: Latin America
Hybrid Mini-grids for Rural Electrification: Lessons Learned
Best Practices of the ARE: What renewable energies can achieve in
developing and emerging markets
The potential of small and medium wind energy in developing
countries-A guide for energy sector decision-makers
Renewable energy in hybrid mini-grids and isolated grids: Economic
benefits and business cases (Frankfurt School-UNEP Collaborating Centre
for Climate and Sustainable Energy Finance, Dec. 2014, 85 pages)
Mini-Grid Policy Toolkit (European Union Energy Initiative Partnership
Dialogue Facility, EUEI PDF/GIZ/ARE, 2014)
Brussels Project Office
EU Technical Assistance
4 Rue de la Presse
Facility for the Sustainable Bureau No 14 (1st floor)
1000 Brussels
Energy for All Initiative Tel.: +32 (0)2 22 71 161 (direct)
Fax: +32 (0)2 22 72 780

Thank you for your kind attention

This report has been prepared by SOFRECO gasNatural fenosa ECN EiR Global CEERD SEVEn
Consortium. The findings, conclusions and interpretations expressed in this document are those of the
Consortium alone and should in no way be taken to reflect the policies or opinions of the
European Commission